United States Department of Labor. We expect this trend to fall to around 35, jobs per month from through the remainder of the decade. Central Statistical Office, Haver Analytics. The actual dollar amount of the potential deficit is also massive in absolute dollars.
These are hotly debated by experts from across the political spectrum. Many experts advocate infrastructure investment, such as building roads and bridges and upgrading the electricity grid. Such investments have historically created or sustained millions of jobs, with the offset to higher state and federal budget deficits.
In the wake of the — recession, there were over 2 million fewer employed housing construction workers. President Obama proposed the American Jobs Act in , which included infrastructure investment and tax breaks offset by tax increases on high income earners.
Lowering the costs of workers also encourages employers to hire more. This can be done via reducing existing Social Security or Medicare payroll taxes or by specific tax incentives for hiring additional workers. CBO estimated in that reducing employers' payroll taxes especially if limited to firms that increase their payroll , increasing aid to the unemployed, and providing additional refundable tax credits to lower-income households, would generate more jobs per dollar of investment than infrastructure.
Reducing the rate and eliminating loopholes may make U. Businesses are faced with paying the significant and rising healthcare costs of their employees. Many other countries do not burden businesses, but instead tax workers who pay the government for their healthcare. This significantly reduces the cost of hiring and maintaining the work force. Various studies place the cost of environmental regulations in the thousands of dollars per employee.
Americans are split on whether protecting the environment or economic growth is a higher priority. Regulations that would add costs to petroleum and coal may slow the economy, although they would provide incentives for clean energy investment by addressing regulatory uncertainty regarding the price of carbon.
President Obama advocated a series of clean energy policies during June Reducing carbon pollution from power plants; Continue expanding usage of clean energy; raising fuel economy standards; and energy conservation through more energy-efficient homes and businesses.
Raising the minimum wage would provide households with more money to spend, in an era with record corporate profits and a reluctance of corporations to invest.
Critics argue raising employment costs deters hiring. President Obama advocated raising the minimum wage during February A range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without jeopardizing employment. In fact, leading economists like Lawrence Katz, Richard Freeman, and Laura Tyson and businesses like Costco, Wal-Mart, and Stride Rite have supported past increases to the minimum wage, in part because increasing worker productivity and purchasing power for consumers will also help the overall economy.
The Economist wrote in December Some studies find no harm to employment from federal or state minimum wages, others see a small one, but none finds any serious damage. Ten states index their minimum wage to inflation.
Regulatory costs on business start-ups and going concerns are significant. Requiring laws to have sunset provisions end-dates would help ensure only worthwhile regulations are renewed. New businesses account for about one-fifth of new jobs added.
Education policy reform could make higher education more affordable and more attuned to job needs. Unemployment is considerably lower for those with a college education. However, college is increasingly unaffordable. Providing loans contingent on degrees focused on fields with worker shortages such as healthcare and accounting would address structural workforce imbalances i.
One of the most consequential examples is early childhood education. Research shows that children from lower-income households who get good-quality pre-Kindergarten education are more likely to graduate from high school and attend college as well as hold a job and have higher earnings, and they are less likely to be incarcerated or receive public assistance.
Income inequality, expressed by wage stagnation for middle- and lower-income families coupled with a shift in income growth to the top earners, can adversely affect economic growth, as wealthier families tend to save more.
The quality or pay of the job matters, not just creating more jobs. The union movement has declined considerably, one factor contributing to more income inequality and off-shoring. Reinvigorating the labor movement could help create more higher-paying jobs, shifting some of the economic pie back to workers from owners. However, by raising employment costs, employers may choose to hire fewer workers. Creating a level playing field with trading partners could help create more jobs in the U.
Wage and living standard differentials and currency manipulation can make "free trade" something other than "fair trade. CBO reported several options for addressing long-term unemployment during February Two short-term options included policies to: Over the long-run, structural reforms such as programs to facilitate re-training workers or education assistance would be helpful. The Council released an interim report with a series of recommendations in October The report included five major initiatives to increase employment while improving competitiveness:.
Analyzing the true state of the U. Further, the reasons for persons leaving the labor force may not be clear, such as aging more people retiring or because they are discouraged and have stopped looking for work. A rough comparison of September when the unemployment rate was 5. The civilian population increased by roughly 10 million during that time, with the labor force increasing by about 2 million and those not in the labor force increasing by about 8 million.
However, the 2 million increase in the labor force represents the net of an 8 million increase in those employed, partially offset by a 6 million decline in those unemployed. So is the primary cause of improvement in the unemployment rate due to: Did the 6 million fewer unemployed obtain jobs or leave the workforce? CBO issued a report in February analyzing the causes for the slow labor market recovery following the — recession. CBO listed several major causes:.
One method of analyzing the impact of recessions on employment is to measure the period of time it takes to return to the pre-recession employment peak. By this measure, the — recession was considerably worse than the five other U. By May , U. For example, it took Norway 8. The ratio of full-time workers was There is a long-term trend of gradual reduction in the share of full-time workers since , with recessions resulting in a decline in the full-time share of the workforce faster than the overall trend, with partial reversal during recovery periods.
For example, as a result of the — recession, the ratio of full-time employed to total employed fell from Stated another way, the share of part-time employed to total employed rose from There is a trend towards more workers in alternative part-time or contract work arrangements rather than full-time; the percentage of workers in such arrangements rose from This implies all of the net employment growth in the U.
Estimates vary for the number of jobs that must be created to absorb the inflow of persons into the labor force, to maintain a given rate of unemployment. This number is significantly affected by demographics and population growth. For example, economist Laura D'Andrea Tyson estimated this figure at , jobs per month during Economist Paul Krugman estimated it around 90, during , mentioning also it used to be higher.
This approximates the Krugman figure. Wells Fargo economists estimated the figure around , in January If the participation rate holds steady, how many new jobs are needed to lower the unemployment rate?
The steady employment gains in recent months suggest a rough answer. The unemployment rate has been 7. Meanwhile, job gains have averaged , Therefore, it appears that the magic number is something above , jobs per month to lower the unemployment rate. Federal Reserve analysts estimated this figure around 80, in June We expect this trend to fall to around 35, jobs per month from through the remainder of the decade.
During the 41 months from January to May , there were 19 months where the unemployment rate declined. On average, , jobs were created in those months. The median job creation during those months was , The entire European Union employed Recipients are excluded from the labor force.
Unemployment can have adverse health effects. Similar effects were not noted for women or the elderly, who had lower workforce attachment. The mortality increase was mainly driven by circulatory health issues e. This suggests that there are true health costs to job loss, beyond sicker people being more likely to lose their jobs.
Studies have also indicated that worsening economic conditions can be associated with lower mortality across the entire economy, with slightly lower mortality in the much larger employed group offsetting higher mortality in the unemployed group.
For example, recessions might include fewer drivers on the road, reducing traffic fatalities and pollution. CBO estimated in December that the Patient Protection and Affordable Care Act also known colloquially as "Obamacare" would reduce the labor supply by approximately 2 million full-time worker equivalents measured as a combination of persons and hours worked by , relative to a baseline without the law.
This is driven by the law's health insurance coverage expansions e. With access to individual marketplaces, fewer persons are dependent on health insurance offered by employers. Bureau of Labor Statistics BLS reported on October 24, its projections of job growth by industry and job type over the — period. Healthcare was the industry expected to add the most jobs, driven by demand from an aging population.
The top three occupations were: BLS also reported that: The goods-producing sector is expected to increase by , jobs, growing at a rate of 0. These sources use a variety of sampling techniques that yield different measures. The FRED database contains a variety of employment statistics organized as data series. It can be used to generate charts or download historical information. Data series include labor force, employment, unemployment, labor force participation, etc.
Some popular data series include:. The Congressional Budget Office provides an unemployment rate forecast in its long term budget outlook. During August , it projected that the unemployment rate would be 8. CBO projected the rate would then begin falling steadily to 5. This forecast assumes real GDP growth would be 1. The Department of Labor's Employment and Training Administration ETA prepares an annual report on those petitioning for trade adjustment assistance, due to jobs lost from international trade.
This represents a fraction of jobs actually off-shored and does not include jobs that are placed overseas initially or the collateral impact on surrounding businesses when, for example, a manufacturing plant moves overseas.
During , there were 98, workers covered by petitions filed with ETA. From Wikipedia, the free encyclopedia. Jobs created during U. Labor force in the United States. Causes of Unemployment in the United States. United States fiscal cliff. Income inequality in the United States. Unemployment rate from to All data are estimates based on data compiled by Lebergott. See image info for complete data.
Bureau of Labor Statistics. Stop Sending Work Overseas-March 31, ". Retrieved 4 October Household data, seasonally adjusted". Retrieved 1 August Retrieved July 22, Retrieved 1 July Party Like It's ! Bureau of Labor Statistics". Retrieved 31 October Recoveries Really Aren't Different-October ". The New York Times. Archived from the original PDF on 14 January United States Department of Labor.
March 22, Page 2 of 2. The Wall Street Journal. Retrieved September 6, Where the Jobs Weren't-December 13, ". Center for Economic and Policy Research. Where did the jobs go and how do we get them back? Implications of the Growth of Contingent Work". Retrieved November 27, Fiscal Years to ". Retrieved July 27, Retrieved August 28, One can see this in Exhibits 10 and 11 , respectively. As my colleague Frances Lim recently indicated to me after an in-depth macro trip to Tokyo, ultra-easy monetary conditions in Japan are beginning to change corporate behavior and there has been steady growth in corporate capex spending in recent years Exhibit 13 , a trend we expect to continue in the current environment of an extremely tight labor market.
Said differently, unlike in the U. Indeed, if the global backdrop is beginning to shift from one of disinflation to one of reflation, then Japan — more so than almost any other country we invest in — should benefit mightily for years.
So, our bottom line is that while we agree with many investors that we may be enjoying a synchronized global economic recovery, monetary policy in is about as divergent as we can remember. Not surprisingly, our call to action is to overweight regions and asset classes where monetary policy is currently more accommodative. Despite a more hawkish central bank, holding local assets in the U. One of the most underappreciated aspects of investing, we believe, is getting the currency right.
It can have a huge impact on returns, particularly around turning points. Importantly, we believe that we are at one of those turning points, with our call that the dollar is now peaking after a 79 month bull run. One can see this in Exhibit To be sure, the dollar may periodically rally in when investors begin to appreciate more our view that the Federal Reserve will be hiking faster than market expectations. Key to our thinking is that the U.
One can see this in Exhibit 16, which shows that there has been no other time — excluding periods of war — where unemployment has been so low and deficits have been so high relative to GDP. The actual dollar amount of the potential deficit is also massive in absolute dollars.
Indeed, as my colleague Brian Leung shows in Exhibit 17 , the U. Separately, if we transition from developed to developing markets, we note that in emerging markets real rates are notably higher than in developed markets.
One can see this in Exhibit 21 , which shows a solid improvement in recent years. As a result, they have more flexibility to ease and still not approach such dramatically low levels of interest that other parts of the world now endure. Now is one of those times, we believe. As such, we prefer to hold more European and Asian assets. Already, in , the penalty for owning dollars has cost investors 2. Treasuries which are down 3.
Moreover, volatility in U. Both Europe and EM are benefitting from our belief that China has already crashed in nominal terms. As we have been describing since late , our base case is that China has already bottomed in nominal terms. One can see this in Exhibit 22 , which shows that nominal GDP declined to 6. It has also helped to limit NPL formation, which helps the economy to better embrace a more realistic cost of capital for new projects. It also has implications for U.
Specifically, it leads us to believe that wide valuation differences between Defensives versus Cyclicals in non-U. Already, one can see the reversal we are predicting has begun to unfold nicely in Exhibit Our quantitative models for both European growth and EM Public Equity outperformance both suggest favorable outcomes for investors.
While we have traditionally managed money using fundamental analysis, quantitative inputs have increasingly become an important part of our macro framework. To this end, we take comfort from two important insights that our proprietary models are underscoring.
First, as we show in Exhibit 29 below, three of our five indicators have turned up in our EM model. We view this quite positively, as the model has demonstrated a strong ability to capture long-term turning points in EM outperformance as well as underperformance. Interestingly, of the two indicators that are not green, one is valuation, which has turned less constructive after the trading multiple gap between developed and developing markets shrunk to a five multiple from seven in recent quarters.
While a two multiple point contraction is significant, we do take some comfort that a five multiple point discount is still quite compelling in absolute terms. Meanwhile, in Europe our model still suggests a strong tailwind from central bank support.
First, though one of the drags in the model in Exhibit 31 is housing activity, our leading indicator for our leading indicator in housing and we acknowledge it is always dangerous to lead a leading indicator has inflected upward. Second, unlike in recent years, the recovery we are now seeing in Europe is extremely broad-based. One can see that in Exhibit 32 , which shows the cross-country growth trajectory has narrowed materially. We view this constructively because in the past, the gap between Germany and its European peers had approached extreme levels, in our view.
Both Europe and Asia are elegant plays on two of our most important macro themes: Without question, being on the ground in Asia and Europe several times in recent weeks has given us additional confidence that we are pursuing the right macro themes. Indeed, given that valuations are quite high in aggregate, we have been more focused on complex situations where an investor may be able to acquire an asset at a discounted price relative to its intrinsic value.
There are several forces at work, we believe. First, as we show in Exhibit 35 , return on capital for many global firms has been in secular decline, with European firms being the weakest performers. Poor management execution, increased competition, and heavier than expected infrastructure costs are all to blame. Second, as we show in detail in Exhibit 36 , many multinationals, particularly those in Japan, just have too many subsidiaries.
Third, activist funds in the public markets represent an important contributor to our thesis. Without question, the increase in dollars raised in this segment is accelerating the streamlining of corporate structures.
One can see this in Exhibits 39 and 40 , respectively, which show both an increase in the velocity of divestitures as well as the number of CEO changes. In India, for example, cinema is exploding, with new air-conditioned multiplexes.
There is also the continued focus on wellness and beauty, including a notable increase in experiential healthy dining options. As Exhibit 42 shows, increased travel by both locals and foreigners remains a secular theme throughout Asia, a trend we heard several times during our time in Mumbai. Estimates are now that international tourist arrivals are forecast to increase by million to reach million by a 4. Technology is certainly playing a role in the inflection point we are describing, but our on the ground meetings lead us to believe that there is much more going on.
For example, in Japan and Germany, both Aidan and Frances report that aging demographics are boosting the use of later stage healthcare offerings, while younger individuals in India and China are embracing more wellness and leisure. All told, Chinese millennials now spend three times as much on leisure as the average Chinese citizen.
Interestingly, in both Europe and Asia it has been poorly performing banks that have created opportunities for Private Credit investors in recent quarters across both the performing and non-performing parts of these markets.
In India, for example, we spent a lot of time reviewing unsecured credits with influential promoters that use the non-bank market because it offers both speed of execution as well as the ability to tackle complex capital structures.
As we show in Exhibits 47 and 48 these loans offer high rates of returns because they embed a significant credit risk premium. To be sure, India is an interesting play on Private Credit, but our recent trips to Indonesia underscore that the opportunity is broad both in terms of geography and sector.
Moreover, because Sydney is her home base, Frances can attest that compelling opportunities have emerged in several developed markets in Asia where KKR operates, including Australia. On the non-performing side in Asia, we continue to be more selective. Non-performing loans in China do not appear to offer a lot of cushion to foreign investors, while India is still in the early stages of enacting its bankruptcy laws.
That said, we are encouraged that the government is finally forcing the state banks to rid themselves of zombie assets, and as such, we do expect some interesting properties to be revitalized in key sectors in India such as power and industrials. In Europe our strong preference today is for Asset-Based Lending. We still like the Direct Lending and NPL markets, but we see more cyclical tailwinds in the hard asset market right now.
Key to our thinking is that there is a change going on in the banking sector, which one can see in Exhibit As we move into later cycle positioning, our asset allocation advice is to tilt toward many of the compelling opportunities we see outside the U.
To be sure, we believe that the recent tax cuts and de-regulation efforts are constructive for the positioning of U. However, much of this benefit now seems to be in the price on a tactical perspective. Maybe more important, though, is that strong growth will likely challenge the central bank in the U.
Meanwhile, many of our quantitative macro models are suggesting a heavy allocation to non-U. Overall, we believe that we are at an important inflection point in global asset allocation. Not surprisingly, both directives stem from our strong belief that investors should spend less time championing the benefits of a global synchronous recovery and more time understanding the difference in monetary policy that the current global growth dynamics are creating.
If we are right, then the upside to these asset allocation changes could be as significant as we have seen since the introduction of quantitative easing QE following the onset of the great financial crisis GFC. Therein lies the opportunity, we believe. The views expressed reflect the current views of Mr. McVey as of the date hereof and neither Mr. McVey nor KKR undertakes to advise you of any changes in the views expressed herein.
Opinions or statements regarding financial market trends are based on current market conditions and are subject to change without notice. References to a target portfolio and allocations of such a portfolio refer to a hypothetical allocation of assets and not an actual portfolio. The views expressed herein and discussion of any target portfolio or allocations may not be reflected in the strategies and products that KKR offers or invests, including strategies and products to which Mr.
McVey provides investment advice to or on behalf of KKR. It should not be assumed that Mr. McVey has made or will make investment recommendations in the future that are consistent with the views expressed herein, or use any or all of the techniques or methods of analysis described herein in managing client or proprietary accounts.
McVey may make investment recommendations and KKR and its affiliates may have positions long or short or engage in securities transactions that are not consistent with the information and views expressed in this document. This document is not research and should not be treated as research. This document does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of KKR.
This document is not intended to, and does not, relate specifically to any investment strategy or product that KKR offers.
This publication has been prepared solely for informational purposes. The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Charts and graphs provided herein are for illustrative purposes only. McVey guarantees the accuracy, adequacy or completeness of such information.
Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. There can be no assurance that an investment strategy will be successful.